June 1, 2005
We are committed to a well structured and well communicated transition to 13 SEER minimum efficiencies over the next six months. The following letter is intended to provide you with key information regarding the transition, including product, pricing, logistics, warranty, and training strategies.
History:
?In 2001, the U.S. Department of Energy (DOE) announced that the current U.S. efficiency minimum for central air conditioning and heat pumps would be raised from 10 SEER to 13 SEER in January of 2006.
?After the Presidential administration change from President Clinton to President Bush, the DOE reversed the new 13 SEER minimum efficiency level back to 12 SEER.
?In 2004 the Second Circuit U.S. Court of Appeals reversed the DOE decision and ruled that the 13 SEER standard would be the official and legal minimum standard.
?Beginning January 23, 2006 HVAC manufacturers cannot build residential single phase air conditioners or heat pumps below the 13 SEER standard. (Note: It is not acceptable per the new DOE standards to produce units that require a variable speed air-handler to achieve 13 SEER. The outdoor unit alone must reach 13 SEER per current ratings standards. )
-Note: HVAC manufacturers may continue to ship 10 ? 12 SEER product until warehouse inventory is depleted.
How Does This Effect Me As a Dealer?:
This change will effect us all in many ways. We have grouped the transition issues into the following topics:
-Transition timing
-Logistics
-Product Offering
-Pricing
-Warranties
-Training
The remainder of this letter will address each of these critical topics.
Transition Timing:
Our strategy will be to attempt to facilitate an early transition to 13 SEER with the vast majority of our customers during the second half of 2005, before the officially mandated date of January 23, 2006.
We expect there to be exceptions to this transition timing such as single family builder projects that begin with 10 or 12 SEER, and multi-family projects, and we will address these accordingly.
Phase Out Plan:
-York will accept orders for 10-12 SEER single phase products through August 31, 2005. Virginia Air will be stocking some 10-12 SEER product for non-project work based on our best estimates for the 4th quarter of 2005.
-Final shipments of 10-12 SEER products from York factories must take place by February 28, 2006.
-These ?final orders? will be non-cancelable. York will attempt to accommodate any requests for additional product added to these orders after August 31, 2005, through the end of 2005, based on their ability to procure components from our suppliers.
-York will help to facilitate this quicker transition to 13 SEER by providing an additional focus on 13 SEER in their consumer rebates, spiffs, and pricing strategy.
?York anticipates being able to fulfill all 10-12 SEER final orders placed by August 31, however it is possible some orders will not be filled due to supplier phase-out of 10-12 SEER components.
?We recommend our dealers analyze all open new construction jobs from September 1, 2005 through the first quarter of 2006 and identify whether these jobs can be converted earlier to 13 SEER, or whether 10-12 SEER products should be ordered prior to August 31, 2005 to ensure continuity on the job. Please remember that because of the increased efficiencies most standard sized 10 SEER indoor units / air-handlers will not achieve 13 SEER and thus careful attention to accurate indoor unit sizing is very important on rough-ins.
Logistics:
There will be a significant impact to our business due to the physical size of 13 SEER units, which may be up to two times larger than current 10-12 SEER units. From a warehousing standpoint, the same number of units are expected to occupy 30-40% more space. This will effect us in the following ways:
-New, typically oversized indoor units / air handler match-ups.
-Increased warehouse space.
-Larger packaging .
-Fewer units per truckload resulting in increased freight costs.
-Increased ability to receive more loads per day will be required.
-Increased manufacturing costs with the increased use of steel, copper, aluminum, and refrigerant.
Product:
York has a full product offering of 13,14, and 15 SEER air conditioners and heat pumps today. York?s product plan efforts will focus on three areas:
1) Cost reducing the existing 13 SEER Latitude unit.
2) Introducing selected models needed to fill small gaps that exist in our line.
3) Continuation of design efforts on a small, compact 13 SEER entry level chassis.
Projects focussed on 13 SEER:
13 SEER Latitude HP (1.5-3.0 Tons) - Entry Level Heat Pump R-22 - Completed
13 SEER Latitude HP (3.5-5.0 Tons) - Entry Level Heat Pump R-22 - Expected 8/22/05
13 SEER Affinity AC & HP (1.5 Tons) - Completion of Offering - Completed
13 SEER Affinity AC (1.5-5.0 Tons) - Affinity AC in R-22 - Expected 11/21/05
13 SEER Affinity HP (1.5-5.0 Tons) - Affinity HP in R-22 - Expected 12/19/05
Pricing:
We expect to see 13 SEER pricing begin to fall in the second half of 2005 as manufacturers introduce their new, cost optimized 13 SEER product lines. Pricing comments are as follows:
?We expect 13 SEER pricing to land slightly above current 12 SEER pricing, roughly +5% higher, in 2006.
?We recommend a quicker transition to 13 SEER to help reduce the risk of obsolete or unavailable inventory, and our pricing strategy will support a quicker transition.
?New products such as our 13 SEER 1? - 3 ton Latitude R-22 heat pump will be introduced at the new, cost optimized 2006 pricing levels.
?Pricing on existing entry level 13 SEER products such as our 13 SEER 1? - 5 ton Latitude air conditioner will be reduced to expected 2006 levels in the third quarter of 2005 to help expedite the transition to 13 SEER.
Warranty:
Our 13 SEER entry level products will have the following warranty:
?13 SEER Latitude HP: Five year parts, five year compressor upon introduction in June, 2005.
?13 SEER Latitude A/C: Five year parts, five year compressor effective January 1, 2006. This product currently has a 10 year compressor warranty.
?13 SEER Affinity chassis: Continue with current 5/10 warranty to assist in stepping up to Affinity product.
Training:
We cannot emphasize enough the need to accelerate our training classes and capabilities as it relates to 13 SEER. We see the need for training in two critical areas:
?Application and Installation ? high efficiency installations are much more sensitive to small errors than lower efficiency installations. Taking the time to do proper load calculations, proper sizing, checking for duct leakage, assuring a proper refrigerant charge and zoning are all factors that become much more important in a high efficiency system installation
?Selling skills - Currently high efficiency sales (13 SEER and higher) represent about 1/3 of industry total product sales. Everyone realizes higher margins and improved customer satisfaction from these high efficiency sales. When dealers ?sell-up?, everyone is better off. When the minimum efficiency becomes 13 SEER, however, there is a danger of the vast majority of sales being at the entry level, lower margin efficiency. Dealers must train their employees on selling techniques and improve their general selling skills in order to continue to ?sell-up? above 13 SEER.
The next twelve months will be a challenging, yet opportunistic time for all of us, and we look forward to succeeding together in a 13 SEER world.
Helpful Links:
Department of Energy - www.doe.gov
Marketing 13 SEER - www.achrnews.com
Adjusting to 13 SEER - www.achrnews.com
<< Back to Active News Room
